BlackBerry Ltd (BBRY) CEO John Chen’s Bet on Hardware Business

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) does not intend to exit the hardware business even on failing to accrue a substantial amount of market share after years of investments. Once the poster child of the industry, the company’s prospects in the handset business continue to dwindle, amidst stiff competition from the iPhones and Galaxies’ of this world.

Even so CEO, John Chen, is putting a brave face reiterating that the company’s hardware prospects are still intact.

Hardware Woes

In the early 2,000’s, Blackberry handsets were well known for quality. The company was able to charge a premium price for the devices as it operated as a monopoly. Fast forward, tables have turned.

BlackBerry Ltd (NASDAQ:BBRY) is no longer the poster child of the business. Its prospects were dealt a big blow by its failure to adapt to changes in the smartphone market. The release of BB10 OS was way overdue, iOS, and Android having accrued a substantial amount of market share that left it playing catch up.

Recent Setbacks

BlackBerry Ltd (NASDAQ:BBRY) has now turned to Android as it seeks to reinvigorate its prospects in the hardware business. Even on making, the switch things are not looking any merrier. Less than stellar sales for the newly released Android powered BlackBerry Priv all but continue to evoke reasons why the company needs to exit the hardware business altogether.

BlackBerry Priv was billed as the smartphone with the potential of saving the struggling hardware unit. If current sales results are anything to go by, then the handset itself is turning out to be a flop. Shipping just 600,000 phones of the new phones is by all standards an underperformance given the millions that Samsung and Apple ship on a quarterly basis.

Priv has enjoyed mixed reviews so far but its major undoing when it comes to sales has always been its price. CEO John Chen has already admitted that the Android-powered device was priced excessively high for the enterprise customers.

“The fact that we came out with a high-end phone [as our first Android device] was probably not as wise as it should have been,” said Mr. Chen.

Banking on Niche Markets

Chen still remains optimistic despite the turbulence which has eroded the prospects of turning profit from hardware business. The executive has re-affirmed that the firm has no immediate plans to stop making smartphones.

One of the reasons why BlackBerry is sticking with the handset business is the fact that a number of customers rely on BlackBerry devices. Given the reputation that these devices have when it comes to security; government, legal medical and banking professionals handling crucial data continue to rely on them.

The software giant is relying on these niche markets as it looks to entice other customers to join the bandwagon.

BlackBerry Ltd (NASDAQ:BBRY) has also eyeing opportunities in the mid-range smartphone market after admitting defeat on the high-end marketplace. Chen has confirmed that they intend to launch two new mid-range handsets before February 2017. One of the phones will come with a physical keyboard with the other one targeting touch screen lovers.

Bottom Line

Shifting focus to mid-range Android devices further affirms that BlackBerry Ltd (NASDAQ:BBRY) is not planning to exit the handset business. However, the news is not expected to go well with investors most of whom believe the company should pull the plug on the business and focus more on software.

One thing that is clear, Chen is ready to pay the ultimate price, all in the effort of reinvigorating the BlackBerry Ltd (NASDAQ:BBRY)’s hardware prospects.

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.